Four proven signals private investors should watch...and how to act on them
When company directors put their own capital into the business they run, it is worth paying attention. They are closer to the numbers, the strategy and the risks than anyone else. In the most compelling cases, insider buying can offer a rare glimpse into what the people with the most to lose really think.
New research from Stockopedia sheds light on how investors can use director dealing data to their advantage.
Drawing on more than 105,000 UK insider transactions over the past decade, the study identifies four consistent patterns that have helped signal meaningful returns.
It offers a framework for separating the signal from the noise in what is often an overlooked and misunderstood area of the market.
Below is a step-by-step guide to help private investors track, interpret and act on these trades with greater confidence.
Buy signals matter more than sells
Many investors instinctively view director sales as a red flag. But in most cases, they are routine. Directors often sell for reasons that have little to do with the company’s performance. They may need to pay tax, diversify a portfolio or fund a personal expense. These transactions tell investors almost nothing about the firm’s outlook.
Buying, on the other hand, sends a much clearer message. As Stockopedia puts it, directors buy for one reason only. They believe the share price is going up. They are putting their own money behind that conviction.
The data backs it up. Across the market, shares bought by directors returned an average of 2.5% over the following month. That rose to 5% when the purchase was large relative to the company’s market value. It climbed further, to 6.5% over 100 days, when the buyer was a chief executive or chief financial officer.
The recent example of RWS Holdings is a case in point. On 25 April, chief executive Benjamin Faes purchased £679,000 worth of shares. That was followed by a further £50,000 investment from chair Julie Southern. After a sharp decline in the company’s share price, these were not symbolic gestures. They looked like a calculated bet on a turnaround.
Cluster buying reveals boardroom confidence
A single insider buying shares might catch the eye. When multiple board members buy in close proximity, it often reflects a shared view within the company that the market has mispriced the stock.
Stockopedia refers to this as cluster buying. Its research found that when three or more insiders buy within a three-month period, average returns increase by around 2% per month above the wider market.
The effect is particularly powerful when it involves senior leadership. It is currently playing out at RWS Holdings, where both the chief executive and chair have made significant purchases within days of each other.
A high-profile historical example came in mid-2022, when several directors at Rolls-Royce began buying heavily at around 100 pence per share. Since then, the stock has risen more than sevenfold, crossing 780 pence by May 2025.
These patterns are not infallible, but they are rarely meaningless. When insiders across the boardroom are buying with conviction, it usually signals an internal view that the business is undervalued.
The chief executive and chief financial officer know the most
All board members have access to company data, but some know more than others. The chief executive and chief financial officer sit at the centre of operational and financial decision-making. They understand forecasts, margins, pipelines and risks in a way that non-executives simply do not.
Stockopedia found that trades by these senior executives consistently outperformed others. CEO and CFO purchases led to average gains of 3.5% over 100 days, whereas trades by non-executive directors had far less predictive power.
Recent trades by company leaders underline this point. Safestore CEO Frederic Vecchioli bought £305,000 worth of stock. Barratt Redrow CFO Mike Scott invested over £20,000. Gym Group CEO Will Orr did the same. And at RWS, Benjamin Faes placed a sizeable personal bet on his own business. In each case, these are leaders who are intimately aware of the challenges and opportunities ahead. When they commit their own capital, it signals more than words can.
Smaller companies offer the biggest edge
Director buying has the greatest effect in small and mid-cap stocks. These companies typically have less analyst coverage and thinner trading volumes. When an insider buys in size, it often reflects genuine belief rather than a publicity exercise.
The numbers are compelling. Stockopedia found that large director purchases in smaller companies can deliver an average return of 5 percent within one month. When combined with strong fundamentals such as value, quality and momentum, success rates rose to over 95 percent.
RWS once again stands out. It is AIM-listed, down from its highs and in a sector that rewards deep operational knowledge. With multiple directors buying meaningfully, the conditions look aligned for a recovery.
How to apply the playbook
Director dealings are not a silver bullet. But when used alongside traditional research and valuation tools, they can be a powerful part of an investor’s process.
Stockopedia’s Smart Money Playbook recommends watching for four clear signals:
- Purchases by chief executives or chief financial officers
- Multiple insider trades in a short timeframe
- Large trades in smaller, undervalued companies
- Stocks that score well on value, quality and momentum metrics
Apply those rules and the current activity across RWS, Safestore, Barratt Redrow, Gym Group and Clarkson begins to look less like background noise and more like smart money moving with purpose.
Private investors may never have the same access as insiders. But by watching where those insiders are putting their own money, they can often get ahead of the crowd.